Lionel Robbins on the Importance of Scholarship Within Economics and Economic Policy

|Peter Boettke|

I will be teaching Modern History of Economic Thought again starting tomorrow (Econ 821 in the GMU catalogue of classes for PhD students). This term I am going to try to emphasize the evolution of economic thought through the 20th century not in terms of abstract theoretical and methodological disputes, but instead as the by-product of the play between ideas and public policy. In doing so, I hope to contextualize the intellectual history of modern economics. To get an idea of what I am talking about consider this statement from the beginning of Lionel Robbins's The Theory of Economic Policy in English Classical Political Economy (1952):

"When I began to study economics, thirty years ago, the senior generation of economists in this country -- Marshall, Edgeworth, Foxwell and Cannan -- were all men who, in their different ways, were truly learned in what may be called the scholarship of the subject; and some acquaintance with the history of economic thought was usually deemed to be a desirable part of the equipment of the economist. But, in the years that have passed since then, this kind of knowledge has come to be regarded as a very unimportant embellishment, as inessential to the economist as a knowledge of the history of chemistry is said to be inessential to the chemist. This development has always seemed to be to be unfortunate. I do not think that, even in the purely analytical field, our knowledge is so far advanced to justify us in writing off as superseded the propositions of all but our immediate contemporaries; and, in the applied field, I do not think we can hope to understand the problems and policies of our own day if we do not know the problems and policies out of which they grew. I suspect that damage has been done, not merely to historical and speculative culture, but also to our practical insight, by this indifference to our intellectual past -- this provincialism in time -- which has become so characteristic of our particular branch of social studies."

But what is Robbins argument for a more scholarly as opposed to scientistic understanding of economics? What is the "Kuhnian loss" that he identifies when he states "I suspect that damage has been done"? It cannot just be his preference for old books. And, it cannot just rely on catchphrases in the public discourse such as "Those who ignore the pass are condemned to repeat it." What actually is the argument underlying the plea for scholarship in the training of economists that will meet the argumentative burden set by the intellectual status quo in economics?

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I'm not an economist, but I can give my own take from my discipline (computational physics):

The belief that a scientist doesn't need to know the history of his discipline is completely mistaken. Even in the hard sciences, "laws" are theories constructed by someone to try to explain observations. Mathematical formulas are not "objective," they exist because some researcher constructed an argument for why this particular abstract formula should mode that particular real-world phenomenon. When doing research in any theoretical framework, you need know where that theory came from, what it superseded, what concerns it addresses, and so on.

This sort of thinking is necessary so that theories are not treated as external facts. In my opinion, when a theory is merely presented in an abstract way, without any historical context, it lends it an additional air of authority it doesn't deserve to have. Knowing the history keeps in mind that, like everything else we do, theories are the work of human minds, and as such may be flawed, may be superseded, and may be critiqued.

It is additionally helpful to understand how the person who formulated a theory tended to think about the subject in general, to know whether that general paradigm is useful or not, or to be more aware of its limitations.

Further, not knowing the history of the discipline means not knowing the debates that happened in it and may in fact still be ongoing.

Much of achieving deep & sound scientific understanding in economics involves getting the problem right, and a good deal of that involves achieiven a sound mapping out all of the conceptual space where you vs the explanatory problem wrong.

As Hayek & Popper put it, our negative knowledge of what is not the case is as important as as any of our positive knowledge.

Economics is the most complex and multifaceted of all the sciences.

It takes a massive assembly o reminders to keep track of all of the dimensions of the conceptual space involved, to understand that space you need to know what are tempting blind alleys -- and why they are blind alley.

Getting clear on what has gone wrong is important in gainin understanding of what has gone right in economics.

Contained in the lifes works of great economists are massive efforts to map out the conceptual space of economic understanding -- both negative knowledge of tempting but flawed efforts and positive knowledge of formal achievements, and the limitations and strengths of their many possible uses.

Economics is massively complex and hard -- the assemble of reminders required to be truly excellent is mind boggling.

Nowhere are these reminders assembled as deep and thought generating form as in he massive efforts of the great economists across life times.

The idiotic ideas of Karl Marx keep coming back from the grave over and over again. The people best-equipped to explain why his ideas are idiotic are economists. But if you don't know your history, you probably don't know them, because they have zero currency in modern economic thought. Yet, I think if economists inspire to inform the public, it is absolutely necessary to know some Marx and the classic responses of economics to his lunacy.

What we think of as "theory" is a summary statement whose meaning is fleshed out by examples, qualifications, and applications. If you read original sources on "the classical theory of value," it comes out way better than in the textbook comparison with marginalism. Mill's famous error to the effect that we were all done with value theory looks more reasonable in the context of his total approach to the topic as opposed to any summary statement. If we stop reading the old masters, we loose all that texture, and lots of the analysis is in the texture. If modern economies are complex in some sense, then we lose a lot when we lose that texture.

@Roger: I was surprised, on reading Smith, to not find the kind of "labor theory of value" that I was expecting. Of course, there was a labor theory of value, but he didn't try to abstract everything into measurable units of unskilled labor. The way he talks about value is significantly "fuzzier" than later attempts to formulate an explicit labor theory.

Economics, especially macro, makes better sense when it is taught as history. The historical framework provides the structure to help understand the development of theory and applications over time. With Macro, students may get frustrated not knowing what is the "right" theory. Instead, when a subject is taught as an unfolding of history, debates and advances build on each other. A good example of this is Mark Skousen's "The Structure of Production."

When a field seems to be struggling, it might help to consider what is most required: (1) new, more or better data to test theories (and policies); (2) new or better theories to test; (3) critical examination of the framework assumptions of the paradigm or the program; or (4) critical comparison of the framework assumptions of rival programs.

With hindsight and the belated publication of Popper's thoughts on metaphysical research programs it looks as though Kuhn and Lakatos led the field of philosophy and methodology in economics astray because they explicitly blocked criticism of the framework assumptions.

Whe a field is making good progress it can get along with the focus on (1) and (2) but when things foul up at the framework level, then some attention to (3) and (4) may help.

On the topic of macro, last week I gave myself bad dreams by scanning several books by Roger Backhouse on macro, he is one of the most rabid Keynesians in the world. In contrast it was a joy to read Thomas Mayer "Truth versus Precision in Economics" which must be a classic exposure of the way theorists have lost touch with the world outside the window. "The principle of the strongest link". Beautiful!

If econ theory (or physics, for that matter) were like the solution to a jigsaw puzzle, then once the puzzle is solved it's solved, and the history of how it was solved, while perhaps interesting, must mean nothing to the correctness of the solution itself. I doubt that that is quite the situation even in physics, much less in econ, though practitioners of the currently dominant paradigm obviously have an incentive to think that it is.

McKinney: "Modern history is written to justify the dominant position in any subject and create a bulwark against attacks on that position."

--A salient observation, in my opinion. Of course, for those who are willing, there are dissenting texts to be sought out and studied, which provide a more diverse perspective and perhaps put one in a better position to apply the lessons of the past to our own time. Now, a standard econ textbook isn't a history per se, but it presents the dominant view of the OUTCOME of the intellectual history. Many voices of the past would have disagreed with this outcome in whole or in part, and they might have been right (though swept aside), or at least partially right, or they may have framed or addressed some issues in ways that we would find useful now.

I suggest that the heart of theoretical advances in disciplines such as econ and physics lies in modeling--not necessarily math modeling but rather generating theoretical constructs that sufficiently resemble or capture features of the world such that by studying them we also learn about what we can expect from the world. In the past, many talented people developed many models, of which many were abandoned, others downplayed, and some elevated to centrality in the dominant paradigm. Many of the abandoned or downplayed models might well, in light of future thought and experience, turn out to be useful, either as-is or with additional development. So: the original writings may be a veritable treasure trove, for those willing to sift through them.

That would be my start on an answer--my prospectus to an answer--to Pete's question, a wonderful question that deserves attention.

"The belief that a scientist doesn't need to know the history of his discipline is completely mistaken."

This is correct. Many people can get by in a discipline working on very limited technical issue with little knowledge of the history of the field, but the great ones know that history, and it will make anyone better.

I have been reading a lot of early twentieth century economics recently. My most interesting discovery is that much of the discussion in Schumpeter's 1908 book ("The Nature and Essence of Economic Theory" aka "Das Wesen")is right on target in today's debates about the role of psychology in economics.

The review of this book by Friedrich Wieser shows what a balancing act Austrians had to engage in to preserve the mentalistic aspects of action against the total incorporation of psychology into economic theory.

Schumpeter was a very brilliant instrumentalist who, unfortunately however, tried to throw out all of mentalistic "embellishments" from *static* economic theory with the psychological bathwater. Much of what he wrote seems just like the views of the contemporary neoclassical critics of behavioral economics, Gul and Pesendorfer.

Mario, interesting comment about Schumpeter. Did you see the post at Circle Bastiat with Rothbard's take on him? Here's an excerpt:

"To admire Schumpeter, as many economists have done, for his alleged realistic insight into economic history in seeing technological innovation as the source of development and the business cycle, is to miss the point entirely. For this conclusion is not an empirical insight on Schumpeter’s part; it is logically the only way that he can escape from the Walrasian (or neo-Walrasian) box of his own making; it is the only way for any economic change to take place in his system."